Hedge fund industry outperforms S&P 500 Index for second month in a row

Hedge fund industry outperforms S&P 500 Index for second month in a row

The hedge fund industry took in a net USD4.7bn (0.3 per cent of assets) in November, reversing a USD10.3bn outflow in October, according to BarclayHedge and TrimTabs.

The latest monthly TrimTabs/BarclayHedge Hedge Fund Flow Report notes that the hedge fund industry earned 0.6 per cent in November, besting the benchmark S&P 500 Index’s 0.3 per cent increase and marking the second consecutive month that the industry outperformed the S&P 500.

“Two months of outperformance signal a notable shift from the dominant trend of the past 12 months, when the industry gained 6.2 per cent while the S&P 500 rose 13.6 per cent,” says Sol Waksman, founder and president of BarclayHedge.

Although returns and cash flow improved in November, the past 12 months have not been so kind. Industry outflows totalled USD21.2bn (1.2 per cent of assets) from December 2011 through November 2012, a sharp reversal compared with the previous 12-month industry inflow of USD61.9bn. TrimTabs and BarclayHedge report that while the industry lost assets last year, top-performing hedge funds continued to gain assets over the same time period.

The Hedge Fund Flow Report also notes that emerging markets hedge funds had the highest returns for the month, at 1.3 per cent, among the 13 categories tracked by BarclayHedge. Distressed securities funds netted the best 12-month returns at 10.0 per cent.

“Emerging market and distressed securities funds show that the riskier investments are generating the higher returns for a change,” says Charles Biderman, founder and chief executive of TrimTabs. “For much of the past year, safer fixed income hedge funds took in the most money by dollar volume and delivered the highest returns.”

Fixed income funds took in USD25.6bn (12.5 per cent of assets) and earned 9.0 per cent over the past 12 months.

The December 2012 TrimTabs/BarclayHedge Survey of Hedge Fund Managers found that managers overwhelmingly expect the S&P 500 Index to rise this year, but few expect a repeat of last year’s strong performance. Managers expect financial and industrial stocks to be the top two sectors this year. Sixty hedge fund managers participated in the survey.